Steffy: Our reign as oil king likely to be very short

That might be the reaction to a report Monday from the International Energy Agency that predicts in eight years the U.S. will surpass Saudi Arabia as the world’s largest oil producer.

The prediction is a stunning testament to energy companies’ success in extracting oil that was previously unrecoverable, but it’s the one bright spot in a report that otherwise requires highly selective reading to be called good news.

One paragraph above the prediction about the U.S. and Saudi, the IEA lays out a far more disturbing scenario, highlighted in boldface type: “The world is still failing to put the global energy system onto a more sustainable path.”

It goes on to outline a future in which consumer demand continues to rise faster than production as nations fight for ever bigger pieces of the same pie.

Even its projection of U.S. oil dominance has an important qualifier. The IEA estimates the switch would happen “around 2020” but noted that the U.S. would remain the biggest oil producer only “until the mid-2020s.” Our reign as the world’s oil king, if it ever happens, probably won’t last more than five years.

Some energy company executives already are questioning the forecast. David Roberts, the chief operating officer of Marathon Oil, which has extensive domestic drilling operations, told investors on a webcast Tuesday that IEA’s findings may be too optimistic.

“I don’t see it, in terms of this country matching Saudi Arabia,” he said.

What’s more, being the biggest producer would mean little to U.S. consumers. We won’t be paying less at the pump because, as the IEA notes, “no country is an energy `island’ and prices for all fuel sources are increasingly global.”

Taken as a whole, the report outlines a world in which we face a shrinking supply of oil, rising prices and a growing toll on the environment.

While U.S. production has been rising, topping 2004 levels, it remains well below our peak production of the early 1970s. Much of the increase is coming from hydraulic fracturing, an expensive technique that results in wells from which initial production declines more quickly than conventional ones.

“It is critically important to understand that the overall rate of decline in oil production from existing U.S. wellbores is going up, as an increasing percentage of U.S. crude oil production comes from shale oil plays, which have a very high decline rate,” said Jeffrey Brown, an independent petroleum geologist who studies and writes about production data.

The result is that oil producers have to drill more and more wells just to stay in place.

So far, we’ve been able to drill more domestically in part because higher oil prices have made shale plays profitable. Even if we assume that we can maintain and accelerate the pace, even if we are miraculously exporting oil by 2030, it probably won’t make gasoline any cheaper.

That’s because the world’s available net exports will remain little changed, Brown said.

We may reorder the ranks of the producers, but it will do little to change the results in the global market.

While conservation and efficiency in the U.S. is expected to reduce oil consumption, it will be offset by increases from emerging economies such as China and India, which in 2005 imported one barrel of oil for every 8.9 barrels of total exports available. By last year, that number had fallen to 5.3 barrels. If that trend continues, in 18 years, those two countries alone will consume all oil available for export in the world, Brown said.

‘A very real problem’

In other words, who produces the most oil will have less to do with what we pay at the pump than who imports the most oil.

“We’re not out of the woods,” said Art Berman, a Sugar Land energy economist. “We have a very real problem with world supply, world price and the environment. None of this makes that go away. This shouldn’t give people a license to squander fuel.”

We’d all like to believe in the promise of energy abundance, but the global patterns of consumption and production are a reminder that the Hummers need to stay on history’s junk heap.

Loren Steffy, loren.steffy@chron.com, is the Chronicle’s business columnist. His commentary appears Sundays, Wednesdays and Fridays. Follow him online at blog.chron.com/lorensteffy, www.facebook.com/LorenSteffypage and twitter.com/lsteffy.